We do not qualify for education credits. We have a 1098-T & a 1099-Q. Should we file these forms or have our daughter include them on her taxes since we don't qualify?
We do not qualify for education credits. We have a 1098-T & a 1099-Q. Should we file these forms or have our daughter include them on her taxes since we don't qualify?
If the 529 funds were spent on qualified education expenses that form doesn’t have to be reported. If the student did not have a scholarship greater than tuition that form can be ignored also.
If your daughter is your dependent, she does not qualify for an education credit, on her own tax return*.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution.When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax (TT) will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip!
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
If you do need to enter the 1099-Q to have TT calculate the taxable portion, it is entered on the "recipient's" return, along with the 1098-T.**
*While technically there is a provision that allows your student-dependent to claim a federal tuition credit, from a practical matter it seldom works out. A student, under age 24, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if he/she supports himself by working. She cannot be supporting herself on student loans & grants and 529 plans and parental support. It is usually best if the parent claims that credit. If the student actually has a tax liability, there is a provision to allow him to claim a non-refundable tuition credit. But then the parent must forgo claiming the student as a dependent, and the $500 other dependent credit. The student must still indicate that he can be claimed as a dependent, on his return. This is worth up to $2500 (AOTC shifts to all non refundable)
**For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from theQualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. The 1099-Q gets reported on the recipient's return, if it even needs to be reported. The recipient's name & SS# will be on the 1099-Q.